A recent management study revealed that only 44% of businesses survive longer than four years. And one of the main reasons these businesses fail is not because they're not profitable, but because they run out of cash.
This information doesn't surprise me. Over the years, I've seen lots of business owners struggle to come to terms with the day-to-day finances of their businesses. They'll employ bookkeepers and accountants to keep an eye on the numbers, but then not have the time, or the know-how (or both), to make sense of the information they have
Certainly, it's a good business principle to be able to delegate. However, when it comes to the finances of your business, being reliant on others to make sense of your day-today operations puts you in an extremely precarious position.
Look I'm not trying to scare you. But I am trying to make you aware of how important understanding the finances of your business is in determining whether your business survives, let alone thrives.
Take The Financial Mastery Quick Quiz to Find Out Where You Stand…
So, to make it easy for you to understand where you are at, I've devised a little quiz for you. Your answers to these 10 questions will tell you if you really do understand your business finances.
1. Do you have profit and loss statements that you review at least once a month?
2. Do you have a current balance sheet that you can read and understand?
3. Have you recently calculated your Return on Investment to see if the blood, sweat, tears and money that you pour into your business is a worthwhile investment?
4. Do you know what your current break even sales level is?
5. Do you have a monthly sales and expenses budget?
6. Do you compare your budget to your monthly results?
7. Do you know who owes you money? And have a systemised process in place for debt collection?
8. Do you have a cashflow forecast that enables you to understand how much cash you have available at any given time (Hint: this is not your bank statement balance!)?
9. Do you have Key Performance Indicators that are diligently measured, reported and acted upon for the four or five critical financial aspects of your business?
10. Can you honestly say that you can read, understand and interpret your Profit and Loss and Balance Sheet statements?
If you answered yes to seven or more of the above questions, congratulations, you're business is most likely in good financial shape.
If not, it might be time to get your finances in order, and avoid being one of those businesses who fails because you didn't have enough money to pay the bills.
This article was provided by Anthea Moffat MBA (adv), MIMC, founder and Managing Director of Business Fusion and The Business Masters Club.
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"The Key Performance Indicators That Every Business Requires (valued at $149.00)... Thursday 3rd May 2012, 4.30pm - 7.30pm at The Function Centre, Technology Park, Bentley, Perth. Click here for more details.